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In this answer the amount of depreciation is deducted. However, depreciation is a non-cash expense and is not included in the calculation of expected cash balance.
This answer results from adding the difference between sales and cash disbursements ($50,000 + $20,000) to the beginning cash balance of $50,000. But sales is not the same thing as accounts receivable collections. The cash balance at the end of the period is equal to Beginning Cash + Cash Receipts ? Cash Disbursements. We know what Beginning Cash is and what Cash Disbursements are. Therefore, to find what the ending cash balance is, we need to determine how much cash the company expects to receive from accounts receivable collections during the coming month. To find the collections for the month, we can use the following formula and solve for receivables collected: Beginning A/R + Sales Made on Account ? Receivables Collected = Ending A/R.
The cash balance at the end of the period is equal to Beginning Cash + Cash Receipts ? Cash Disbursements. We know what Beginning Cash is and what Cash Disbursements are. Therefore, we need to determine how much cash the company expects to receive from accounts receivable collections during the coming month. Beginning A/R + Sales Made on Account ? Receivables Collected = Ending A/R. Whenever we know three of these four amounts, we can calculate the fourth one. We know Beginning A/R ($180,000), Sales Made on Account ($800,000), and Ending A/R ($210,000). Therefore, we can calculate that Receivables Collected = $770,000. Now, we can calculate the Ending Cash balance. The Ending Cash balance will be $50,000 Beginning Cash + $770,000 Cash Receipts ? $780,000 Cash Disbursements = $40,000 Ending Cash. Depreciation is a non-cash expense and is not included in calculation.